Palmisano moves up into Gerstner heir slot at IBM

But has Lou enjoyed all the good years already?

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Sam Palmisano has been made president of IBM as well as COO, which positions him as the most likely to succeed Lou Gerstner as chairman when he retires. Palmisano was executive assistant to John Akers, the previous chairman, then ran IBM Japan before a stint as number two in global services. He went on to run the personal computer unit and was then appointed head of global services. He is regarded as the catalyst who transformed IBM from a hardware company to a services company.

Gerstner has been running IBM for seven years without a clear successor. This has kept senior executives on their toes, but Palmisano's appointment may well account for the departure of former personal systems group leader and rival David Thomas, who didn't manage to turn the unit around quickly enough: it is now expected that it could achieve profitability by the end of the year.

John M Thompson, who was running the software operation, is being made vice-chairman, but is too old to be a candidate for the top job. It is expected that both Palmisano and Thompson will be appointed to the IBM board.

Gerstner said that "we need a new organisational approach that will strengthen our focus on both day-to-day marketplace results and future growth opportunities." That's true, but there's still considerable frustration at the slowness of the recovery. Should the company not turn around and produce revenue growth and decent profits before the end of this year, Gerstner could well find himself the subject of shareholder wrath and retire somewhat earlier than he had anticipated. ®